Weekly Memorandum 8/30/2021
Once again, stocks started off the week in the most bullish manner possible, by notching new all-time highs. However, we've yet to see the Dow Jones join the party, so unless it can do so soon, it could turn into a sell signal. Even so, this speaks to the equity market's capital flows, whereby growth and tech continue to outperform value and inflation-sensitive portions of the market. This has been the dominant trend for years now, but with the macroeconomic environment evolving, we could be due for a change sometime soon.
One reason why we are entertaining this notion is because the U.S. Dollar may have just experienced a false-breakout, and as the saying goes, "From false-moves, come fast moves." A falling dollar is typically inflationary. This means that bond prices would likely fall in response, and rates would rise. There is a good chance that we saw a low of significance in Crude Oil last week, and if confirmed, the subsequent rally would likely place further pressures on inflation expectations.
Cryptocurrencies continued their short-term consolidation last week, but appear poised to trend higher. Gold and Silver also experienced nice rallies last week, which could be the start of a new rally in this sector.
A new Mercator Crypto report will be published tomorrow, where we will update our outlook on this booming sector.